The implementation of Sacramento’s new “3 inspector policy” per show is turning out to be a disaster, not only for liability purposes (enforcing health & safety) but also for managing the box offices at live events. Mismanaging cash is bad enough, but placing fighters at risk for getting severely injured or killed is an entirely different matter.

I guarantee you that the lack of inspectors & supervision at shows is resulting in boxers who are skinning their gloves (manipulating the knuckle padding) and using illegal hand wraps more frequently. I’ve already heard of a couple of recent events where there have been some dangerously close near-misses in regards to fighters skinning their gloves. Throw on top of that the ability to use foreign substances and the ability for fighters or their entourages to hide active drug use at events and you have a recipe for disaster.

This is the commission asking for trouble when it comes to bad publicity and big liability. Penny-wise and pound-foolish.

Not only are we hearing reports about skinned gloves and illegal hand-wraps being discovered at recent boxing events in California, we also were notified by multiple individuals about a bizarre scene that took place last Saturday night in Fairfield, California at the Fairfield Sports Center for a boxing event promoted by veteran promoter Don Chargin. The headliner was welterweight Alan Sanchez.

The show, which was a television taping for TeleFutura, had to be delayed when someone pointed out that one boxer had different size gloves on than the other boxer. Mind you, both boxers are fighting in the same weight class and one had smaller gloves on than the other. This is dangerous.

For Welterweights, you’re talking about 8 ounce boxing gloves. Over 154 pounds, the gloves used are at 10 ounces. So, what’s the big deal about one fighter having smaller gloves than the other? For starters, if you are using smaller gloves it means you have more speed and less padding. If you’re in a long fight, the boxer with lighter gloves in later rounds won’t have his arms as tired as his opponent with the heavier gloves. Throw in the fact that used gloves are utilized by undercard fighters and, after a couple of bouts, the gloves practically are skinned due to wear & tear. This means less padding around the knuckles and thus the gloves become more of a weapon to cause traumatic damage against an opponent.

The fact that one fighter was allowed to come to the ring with different size gloves on than his opponent is nothing short of negligence by CSAC officials. The inspectors are supposed to go through the gloves in the locker room before the fights and the fighters are supposed to have a back-up pair of gloves handy in case something happens to the original set of gloves (such as a tear). Once the inspector checks out the gloves, they are supposed to sign off on them. However, a recent CSAC memo says that referees can also sign off on the hand wraps and glove inspections as well due to the limited amount of inspectors per show. The referees are supposed to check the gloves of the fighters in the ring to make sure everything is on the up-and-up. The fact that somebody that wasn’t an inspector or a referee at the Don Chargin show pointed out the discrepancy in the size of the gloves is alarming. I’m thankful the person who figured this out made sure others knew what was going on, but it’s still egregious behavior by the CSAC inspectors at the show nevertheless.

And they still want to cut the amount of inspectors at shows?

Issues of strict liability

Boxing, by a legal definition, is an ultrahazardous activity. In legal terms, it means that no matter how many precautions you take in regulating such a dangerous sport, there are matters of strict liability involved if someone gets seriously hurt. Generally, the term strict liability is used when you’re talking about the commercial code and incidents where you are dealing with defective products or accidents where dangerous materials are being transported. Read this Findlaw item for an example of this in action.

In the case of strict liability for the state of California, you better believe that the state could be found liable for damages against a fighter who is severely injured, crippled, or killed because of negligent actions by an inspector and/or licensed official regulating a combat sports event. If the damage caused by such negligence is high, you’re easily talking about a jury awarding a 7-figure verdict against the state of California if there was an incident regarding a fighter using the wrong size of gloves, using skinned gloves, or using illegal hand wraps containing a substance like plaster of paris. It would not be hard for a jury to award such a verdict to a fighter based on pain & suffering and emotional distressed caused by injuries resulting from direct regulatory negligence.

It’s also assault by the fighter in question if they’re using such an illegal set-up and knowingly wanted to inflict major damage on their opponent. Paging Louis Resto.

So, the choice the Department of Consumer Affairs has is a pretty simple one. Are you willing to get rid of the incompetent & bad apples at the commission or are you willing to continuing rolling the dice that an incident happens that costs the state of California 7-figures in court? Are you willing to adequately staff shows you regulate with the right amount of inspectors and use inspectors that are qualified as opposed to using inspectors that you think you can politically control?

There are sections in the Business & Professions Code that talk about incompetency as an issue for getting rid of people who aren’t doing their job. Perhaps it’s time to dust off the legal books and start following your own rules & regulations before someone is seriously hurt by your inaction.

Bad judgment just always seems to be part of the DNA of the Department of Consumer Affairs.

Box office BS stinks to high heaven

Last Tuesday, we posted a very detailed article laying out our case of what auditors working for the state of California may find during their investigation of the California State Athletic Commission. If you didn’t get a chance to read our report, I would strongly recommend that you do so. We not only made predictions, we also cited the laws that both the Sacramento CSAC office and the inspectors out in the field are not following. The end result is that the state of California is losing out on significant revenue from shows because the cash is either missing or not being properly reported on the ticket manifests (ledgers). With the Sacramento front office not regularly auditing the event packages being sent from the inspectors to the office after each show, the end result is that auditors are going to find event packages full of mistakes & glaring errors.

To put it to you in different terms, here’s what the state auditors are likely to discover during their investigation of CSAC:

1. Many of the lead inspectors that supervise shows are not managing the box office correctly, resulting in the state of California getting stiffed on cash.

This includes:

Relying on the numbers that promoters are telling them as opposed to actually using a system of checks and balances

Not having access to seating charts (the Sacramento office is, by law, supposed to have a seating chart on file before tickets to an event are sold)

Not properly managing complimentary tickets and allowing promoters to skim off the top by giving out tickets without labeling them as sold or as comps

Mismanagement of calculating how many comps are being given out at shows, not giving out a ticket to each person who gets a courtesy pass and collecting it

Not enforcing rules regarding promoters needing to overstamp tickets that have been sold at a reduced price

Not enforcing a policy of tickets being exchanged only at the box office

Not collecting ticket stubs necessary to do a basic show audit

Not enforcing refund policies that are on the books to protect the customers

2. A complete inability to audit the box office.

If you have no idea how many tickets were printed for a show, how can you come up with an account of just how many tickets were actually sold? If I give you two dozens eggs to sell and you give me back six, I know how many are sold (18). If I don’t know how many eggs there are to begin with, how can I audit the amount of eggs that you allegedly sold? If the tickets are not from an approved printer, how do I know the invoice is legitimate? The law states that not only shall the printer be approved by the commission but they are also supposed to send an invoice to Sacramento for verification. But nobody is following the law.

The CSAC front office not only doesn’t audit the event packages on the regular basis, they often are short-staffed because some of the office crew work as lead inspectors at shows and take time off from their original office duties. With the cuts being made to the front office in Sacramento, expect this problem to get significantly worse (not better).

We wrote our audit article to make a statement. The conditions have deteriorated so fast with the California State Athletic Commission that no one can even trust the box office numbers any more nor can anyone trust that the inspectors currently being used out in the field are competent enough to enforce the rules on the books or are simply too overwhelmed to do so because of how few bodies there are at events to properly manage a show.

In regards to the issue of complimentary tickets, take a look at the state’s Business and Professions Code (18824):

(D) No fee is due in the case of a person admitted free of charge. However, if the total number of persons admitted free of charge to a boxing, kickboxing, or martial arts contest, or wrestling exhibition exceeds 33 percent of the total number of spectators, then a fee of one dollar ($1) per complimentary ticket or pass used to gain admission to the contest shall be paid to the commission for each complimentary ticket or pass that exceeds the numerical total of 33 percent of the total number of spectators.

The reason this is an issue now in California is because there have been some recent boxing events where almost 80% of the tickets at recent events have been comps. If promoters are skirting around reporting the amount of comps they have by not reporting those tickets as such, it gives them an out to give a bunch of tickets to potential sponsors in exchange for cash that they pocket on their own and don’t report to the state of California.

Here’s an example. A promoter cuts a deal with a sponsor for $1,000. When the sponsor brings their group of people to the show, the promoter ends up giving the party passes to sit at a table at the show. Instead of having tickets listed as $200 each for value, the promoter is keeping the sponsorship money and the state gets $0. The state never sees the money if the inspector isn’t enforcing the rules & regulations on managing a box office. Furthermore, what if you sell tickets under the table and pocket the cash because the inspectors have no clue how many tickets there were to begin with or have no idea about a seating chart for the show? Skimming off the top is easy for promoters to get away with because of the incompetence & corruption of the inspectors who are supposed to be representing the state of California as intermittent state employees.

This kind of bad behavior simply incentivizes bad behavior from promoters who are looking out for themselves.

Who’s collecting the licensee money and where’s it going?

Since we wrote our article last Tuesday, we’ve been informed by multiple sources of new problems that have arisen at recent boxing & MMA events regulated by CSAC. Some of these problems are issues that we covered in our audit problems but some of them are brand new issues that I never even thought would pop up.

Last Tuesday, we wrote the following about the process of people getting licensed by inspectors at events:

Remember, the process for medical records & licensing isn’t computerized. It’s 2012 and we’re still talking about everything being done on paper here. You have licensees who pay the same day to get licensed. Is the money being collected properly at events and, if so, is it being compared to the number of licenses issued? I think it’s safe to predict that the auditors will find some discrepancies here. If Sacramento is not auditing the show package, who would know?

It turns out that this problem may be very real and very ugly.

At recent live events regulated by the California State Athletic Commission, lead inspectors supervising shows are allegedly misappropriating money being given to them by licensees. A licensee can pay an inspector by check/cash or have their fee taken out of their purse. In instances where licensees pay by cash, the lead inspector gives the cash to the promoter and in return adds that same amount from the box office. In other words, a lead inspector collects $500 in cash from licensees. The inspector turns around and gives the promoter $500 in cash and then, on paper, adds that same amount from the box office so that the promoter ends up paying the state for it through that avenue.

If a licensee pays by cash or check, the lead inspector is required by law to produce a receipt for the transaction and is required to staple the check to the application form that the licensee filled out.

So, what’s the issue popping up at shows now? One, some lead inspectors are not producing receipts for the licensee transactions. If you’re not producing receipts for these kinds of actions, how can you audit the event package back in Sacramento? Sacramento is supposed to audit the event package and compare the amount of licenses granted versus what revenue was taken in for giving out the licenses at the shows. The numbers are supposed to match. So, what’s going on here? The lead inspectors aren’t doing their jobs and they’re getting their cue from Sacramento that since the front office doesn’t care enough to audit all the event packages, then why should they care enough to do their job and produce the receipts?

One source, on background, put it to us this way.

“If [CSAC] can’t even get their drug tests done right for [Zuffa], a little receipt that people are going to throw away anyways is the least of their worries.”

18825. An inspector or other representative of the commission duly authorized by the executive officer shall be admitted to the box office, and is authorized to assist in the counting of tickets and in the computation of the tax due thereon, and to take any other action necessary for the administration and enforcement of this chapter. The inspector or other representative shall immediately mail to the commission the official statement of gross receipts received by him or her from the promoter.

If a lead inspector isn’t properly producing the receipts for the transaction of cash when it comes to licensees, they are violating state law. Under the B & P code, violating these laws are misdemeanors. Looking for a DA’s office to prosecute a commission worker just isn’t likely to happen. What is much more likely to happen, however, is if there’s enough pressure on the state to go ahead and use the allegation of a B & P code violation as grounds for termination via a notice of adverse action from the State Personnel Board. Unfortunately, we’re not even seeing that at work right now in Sacramento. No wonder the inspectors out in the field who are causing trouble don’t give a damn about what’s going on.

A second reported problem with the licensee transactions is that the cash figures being reported by the lead inspectors for licensee applications is not matching up with how many transactions were performed. In other words, if you grant $500 worth of licenses and you don’t report the cash transacted as $500, you leave yourself up to scrutiny for either making a bad (but honest) mistake or for theft of funds that are supposed to go to the state of California.

503. Embezzlement is the fraudulent appropriation of property by a person to whom it has been intrusted.

504. Every officer of this state, or of any county, city, city and county, or other municipal corporation or subdivision thereof, and every deputy, clerk, or servant of that officer, and every officer, director, trustee, clerk, servant, or agent of any association, society, or corporation (public or private), who fraudulently appropriates to any use or purpose not in the due and lawful execution of that person’s trust, any property in his or her possession or under his or her control by virtue of that trust, or secretes it with a fraudulent intent to appropriate it to that use or purpose, is guilty of embezzlement.

514. Every person guilty of embezzlement is punishable in the manner prescribed for theft of property of the value or kind embezzled; and where the property embezzled is an evidence of debt or right of action, the sum due upon it or secured to be paid by it must be taken as its value; if the embezzlement or defalcation is of the public funds of the United States, or of this state, or of any county or municipality within this state, the offense is a felony, and is punishable by imprisonment in the state prison; and the person so convicted is ineligible thereafter to any office of honor, trust, or profit in this state.

While the revenues in the big picture from licensees is small potatoes for CSAC, it is a perfect example to illustrate just how badly things have gone out of control. If the inspectors out in the field think that the Sacramento office, which is leaving the inspectors to their own devices, doesn’t care about enforcing the rules & regulations on the books, why should they care? After all, Denise Brown is the one who signed off on an insolvency letter to George Dodd last May claiming that SHE KNEW ABOUT FRAUD that was taking place at the commission but didn’t have anyone arrested or fired over such actions. The Department of Consumer Affairs, in writing, admitted that they know that fraud is taking place at the California State Athletic Commission and has done absolutely nothing about filing any sort of notice of adverse actions against those who they suspect are guilty of criminal activity in order to get the bad apples terminated.

Apparently DCA only uses notice of adverse actions to get rid of competent individuals like (former) Chief Athletic Inspector Dean Lohuis, Joe Borielli, and inspector Dwayne Woodard so that they can keep other people around, with shady backgrounds and situational ethics, at CSAC. Of course, that gamble by Consumer Affairs relies on the inmates in the asylum actually following their marching orders.

As the state’s auditors will soon discover, the inmates aren’t listening much to the Department of Consumer Affairs and have gone into business for themselves.

The fact that Denise Brown, in writing, admitting to having knowledge of on-going fraud at the California State Athletic Commission is a red flag. Why is nothing being done? Is obstruction of justice taking place? There’s a difference between a normal citizen reporting a violation and the actual head of the Department of Consumer Affairs acting upon violations that they know of. Huge difference.

Unfortunately, as one source (on background) recently stated to me in a conversation, “Nobody is afraid of each other in Sacramento any more.”

Reason? Nobody is following the rules & regulations in the front office.

Ask yourself this question — if you were caught embezzling funds and the authorities knew about your activity, would you be treated the same way as individuals at the California State Athletic Commission are being treated by the Department of Consumer Affairs? No, of course not. You would be criminally charged by a prosecutor.

Where does the buck stop?

Chief Athletic Inspector Che Guevara.

He’s supposed to be the boss of bosses for inspectors at the California State Athletic Commission. Who’s responsibility and job is it to make sure that the lead inspectors are doing their job and making sure that event packages are being properly processed? Che Guevara.

Who’s responsible for the inspectors being educated on the rules & regulations that they should be following while doing their jobs on behalf of the state of California? Che Guevara.

Who’s responsible for making sure that inspectors are accountable for their actions if they allow incidents such as illegal hand wraps and skinning the gloves to happen at shows? The Chief Athletic Inspector, Che Guevara.

But how can he educate inspectors on illegal hand wraps and skinning the gloves when he was the one who, three years ago, missed the illegal hand wraps of Antonio Margarito right in front of his face? Not only was he not punished for missing the hand wraps, he was promoted to Chief Athletic Inspector at the California State Athletic Commission.

The buck is supposed to stop with Che Guevara. It’s on him. Who’s holding him accountable? Nobody.

In order to assist you in generating additional savings, several areas of concern have
been identified that could help the Athletic Commission remain solvent on an ongoing
basis:
• Utilizing office staff, instead of Athletic Inspectors, to perform all clerical duties
(putting together event packages, etc.).
• Limiting travel by Athletic Inspectors to regions outside of their headquarters.
• Strictly auditing timesheets and travel claims for accuracy and excessive claims
of hours.
• Limiting the number of Athletic Inspectors at events to only what is absolutely
necessary.
• Developing a minimum gate tax, in regulations, to ensure that the Commission is
not expending more money than is being collected in revenue while regulating
events.
• Halting the use of temporary help in the office.
• Performing a strict count out of ticket sales and attendance at the conclusion of
each event and requiring proper documentation from promoters regarding ticket
sales as well as a count of complimentary tickets to ensure proper revenue
collection.
Sincerely,

Original signed by:
Denise Brown
Director, Department of Consumer Affairs

[...] after DCA chased out Dean Lohuis in a disgusting manner. It was Che Guevara, not Dean Lohuis, who screwed up on the illegal hand-wraps that Antonio Margarito got caught having before his 2009 Staples Center fight against Shane Mosley. And, yet, DCA & the AG’s [...]